A Treatise on Political Economy

Jean-Baptiste Say
Say, Jean-Baptiste
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C. R. Prinsep, trans. and Clement C. Biddle., ed.
First Pub. Date
Philadelphia: Lippincott, Grambo & Co.,
Pub. Date
6th edition. Based on the 4th-5th editions.
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It is common to hear people descant upon the benefits of an active circulation; that is to say, of numerous and rapid sales. It is material to appreciate them correctly.


The values engaged in actual production cannot be realized and employed in production again, until arrived at the last stage of completion, and sold to the consumer. The sooner a product is finished and sold, the sooner also can the portion of capital vested in it be applied to the business of fresh production. The capital being engaged a shorter time, there is less interest payable to the capitalist; there is a saving in the charges of production; it is, therefore, an advantage, that the successive operations performed in the course of production should be rapidly executed.


By way of illustrating the effects of this activity of circulation, let us trace them in the instance of a piece of printed calico.*46


A Lisbon trader imports the cotton from Brazil. It is his interest that his factors in America be expeditious in making purchases and remitting cargoes, and likewise, that he meet no delay in selling his cotton to a French merchant; because he thereby gets his returns the sooner, and can sooner recommence a new and equally lucrative operation. So far, it is Portugal that benefits by the increased activity of circulation; the subsequent advantage is on the side of France. If the French merchant keep the Brazil cotton but a short time in his warehouse, before he sells it to the cotton-spinner, if the spinner after spinning sell it immediately to the weaver, if the weaver dispose of it forthwith to the calico printer, and he in his turn sell it without much delay to the retail dealer, from whom it quickly passes to the consumer, this rapid circulation will have occupied for a shorter period the capital embarked by these respective producers; less interest of capital will have been incurred; consequently the prime cost of the article will be lower, and the capital will have been the sooner disengaged and applicable to fresh operations.


All these different purchases and sales, with many others that, for brevity's sake, I have not noticed, were indispensable before the Brazil cotton could be worn in the shape of printed calicoes. They are so many productive fashions given to this product; and the more rapidly they may have been given, the more benefit will have been derived from the production. But, if the same commodity be merely sold several times over in a year in the same place, without undergoing any fresh modification, this circulation would be a loss instead of a gain, and would increase instead of reducing the prime cost to the consumer. A capital must be employed in buying and re-selling, and interest paid for its use, to say nothing of the probable wear and tear of the commodity.


Thus, jobbing in merchandise necessarily causes a loss, either to the jobber, if the price be not raised by the transaction, or to the consumer, if it be raised.*47


The activity of circulation is at the utmost pitch to which it can be carried with advantage, when the product passes into the hands of a new productive agent the instant it is fit to receive a new modification, and is ultimately handed over to the consumer, the instant it has received the last finish. All kind of activity and bustle not tending to this end, far from giving additional activity to circulation, is an impediment to the course of production—an obstacle to circulation by all means to be avoided.


With respect to the rapidity of production arising from the more skilful direction of industry, it is an increase of rapidity not in circulation, but in productive energy. The advantage is analogous; it abridges the amount of capital employed.


I have made no distinction between the circulation of goods and of money, because there really is none. While a sum of money lies idle in a merchant's coffers, it is an inactive portion of his capital, precisely of the same nature as that part of his capital which is lying in his warehouse in the shape of goods ready for sale.


The best stimulus of useful circulation is, the natural wish of all classes, especially the producers themselves, to incur the least possible amount of interest upon the capital embarked in their respective undertakings. Circulation is much more apt to be interrupted by the obstacles thrown in its way, than by the want of proper encouragement. Its greatest obstructions are, wars, embargoes, oppressive duties, the dangers and difficulties of transportation. It flags in times of alarm and uncertainty, when social order is threatened, and all undertakings are hazardous. It flags, too, under the general dread of arbitrary exactions, when every one tries to conceal the extent of his ability. Finally, it flags in times of jobbing and speculation, when the sudden fluctuations caused by gambling in produce, make people look for a profit from every variation of mere relative price: goods are then held back in expectation of a rise, and money in the prospect of a fall; and, in the interim, both these capitals remain inactive and useless to production. Under such circumstances, there is no circulation, but of such products as cannot be kept without danger of deterioration; as fruits, vegetables, grain, and all articles that spoil in the keeping. With regard to them, it is thought wiser to incur the loss of present sale, whatever it be, than to risk considerable or total loss. If the national money be deteriorated, it becomes an object to get rid of it in any way, and exchange it for commodities. This was one of the causes of the prodigious circulation that took place during the progressive depreciation of the French assignats. Everybody was anxious to find some employment for a paper currency, whose value was hourly depreciating; it was only taken to be re-invested immediately, and one might have supposed it burnt the fingers it passed through. On that occasion, men plunged into business, of which they were utterly ignorant; manufactures were established, houses repaired and furnished, no expense was spared even in pleasure; until at length all the value each individual possessed in assignats was finally consumed, invested or lost altogether.

Notes for this chapter

The term circulation, as well as many others employed in the science of political economy, is daily made use of at random, even by persons that pride themselves upon their precision. "The more equally circulation is diffused," says La Harpe, in one of his works, "the less indigence is to be found in the community." With great deference to the learned academician, what possible meaning can the word circulation have in this passage?
The trade of speculation, as we have before observed, (suprà, Chap. IX.) is sometimes of use in withdrawing an article from circulation, when its price is so low as to discourage the producer, and restoring it to circulation, when that price is unnaturally raised upon the consumer.

Book I, Chapter XVII

End of Notes

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